Optimal investment strategy to minimize occupation time

Erhan Bayraktar and Virginia Young ()

Annals of Operations Research, 2010, vol. 176, issue 1, 389-408

Abstract: We find the optimal investment strategy to minimize the expected time that an individual’s wealth stays below zero, the so-called occupation time. The individual consumes at a constant rate and invests in a Black-Scholes financial market consisting of one riskless and one risky asset, with the risky asset’s price process following a geometric Brownian motion. We also consider an extension of this problem by penalizing the occupation time for the degree to which wealth is negative. Copyright Springer Science+Business Media, LLC 2010

Keywords: Occupation time; Optimal investment; Stochastic control; Free-boundary problem (search for similar items in EconPapers)
Date: 2010
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DOI: 10.1007/s10479-008-0467-2

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